- Section 80GGA helps avail tax deductions on contributions made towards scientific research and rural development
- It can be availed only by individuals who do not have an income source from business or profession
- There is no upper limit to the sum that one can donate to institutes which adhere to principles under this Section.
- Cash donations made in excess of Rs 10,000 are not eligible for deduction
- One should verify the institute where donation is being made is registered and their registration number is valid on the day of making donation
Just the way Section 80G tax benefits are passed to those individuals who donate to charities that qualify for the tax relief, Section 80GGA allows tax deductions on donations made towards scientific research or rural development. This section was introduced with the aim to offer incentives to individuals donating to noble causes, helping them save money and increasing philanthropy. This deduction is allowed to all assessees except those who have income (or loss) from business or profession. There is no upper limit to the sum that one can donate to institutes which adhere to principles under this Section.
Who can claim the deduction?
One can claim the benefit under this head if one does not have income from business or profession. Individuals with income from business or profession can claim deduction for the same under Section 35. Likewise, the donation can be in the form of cash, cheque or draft. However, cash donations made in excess of Rs 10,000 are not eligible for deduction.
How much can be claimed?
The entire whole amount donated, that is 100% of amount donated qualifies for deduction, as there is no cap or upper limit on the deduction amount. For instance, an individual taxpayer has an annual taxable income of Rs 5 lakh and decides to donate Rs 50,000 to an institute engaged in rural development. Under Section 80GGA this individual’s donation will be eligible for tax deduction, which will make the taxable income post the donation Rs 4.5 lakh, provided the donation has been made via cheque or draft. If the donation was made by cash, only Rs 10,000 would be considered for deduction.
How to claim the deduction?
To claim deduction under Section 80GGA, the taxpayer needs to furnish the following along with their Income Tax Returns: name of the donee, PAN of the donee, address of the donee and the amount contributed.
Section 80GGA and 35AC
Sections 35AC and 80GGA have certain common features when it comes to income tax deductions. While 80GGA offers 100% deduction on donations made by individuals who have an income source which does not come from a business or profession, 35AC allows individuals who have an income through business or profession to enjoy the benefits of tax deduction. Donations under both these sections are eligible for 100% tax deduction, helping NGOs gain funds and individuals save on taxes. The major difference between these two sections lies in their carry forward policy. While deductions under Section 35AC can be carried forward to the next year in the form of a loss, deductions under Section 80GGA cannot be carried forward to the next year in the form of losses.
Documents Required to Claim Deduction under Section 80GGA
Form 58A: Donors need to ensure they get a copy of Form 58A, which is essential for them to claim 100% tax deduction in lieu of donations made to institutes/NGOs.
Double Deductions under Section 80GGA: Only one deduction is allowed for a particular assessment year. Section 80GGA does not permit double deductions, which means, if a donation towards a certain cause is claimed as a deduction for a particular assessment year then no other deduction can be claimed for the same year under this section.
Approval withdrawal: One should check up on an institute before donating money to see if it is registered and complies with the rules in place. It is possible for institutes to lose their affiliations/approval at times. In such cases, any donation made to an institute before it loses its approval stands valid and can be claimed for deduction.
Types of institutions prescribed under Section 80GGA
The following institutions can get you 100% deduction on the amount donated to them:
- Donation made to an approved Scientific Research Association, university, college, or other institution to be used for scientific research.
- Donation made to an approved university, college or other institution for statistical research or research in social science.
- Donation made to an association or institution engaged in any approved programme for rural development, or which is engaged in training of persons for implementation of rural development programmes, or to a notified rural development fund or to the notified urban poverty eradication fund.
- Donation made to a public sector company or a local authority, or to an association or institution approved by the National Committee, for carrying out any eligible project or scheme.